Industry reacts to Publicis-Omnicom merger

First of all, breathe. Like all mergers, the proposed union will take a while, if it happens at all. "They’ve just announced an intention to merge and the whole process will take at least until 2014," Darren Woolley, managing director of TrinityP3, told Campaign Asia-Pacific this morning. "They have to get shareholder approval and regulatory approval in the US and the EU, both of which are full of politicians very nervous about one company controlling 40 per cent of media spend."  

However, in Asia-Pacific, Dentsu-Aegis, with $4.7 billion in revenue, will continue to dwarf both the combined Publicis-Omnicom and WPP, with $2.6 billion and $2.7 billion, respectively, he said.

In China, WPP will still have an advantage, with RMB6.1 billion (about US$1 billion) in revenue, compared to the combined group’s approximately $730 million. Kantar alone in China has more than 3,000 employees and is one of the factors in the gap, Paull added.

As for client conflicts, Paull downplayed the potential angst. "There’s been a lot of talk on potential conflicts such as Coca-Cola and Pepsi—Coca-Cola has had an unwritten rule never to work with an Omnicom agency, given Pepsi’s alliance," he said. "We personally don’t see these as major issues. These have been more of a challenge for individual agency brands merging, such as Lowe and Lintas or Draft and FCB. Holding company media groups such as GroupM in Asia-Pacific already work with Unilever, P&G, L’Oreal, Colgate and SC Johnson across multiple sub agencies. We don’t anticipate any massive agency fallouts."

"However, we do see a lot of future pressure on media accounts currently with other agencies—$110 billion talks, clients of other agencies may walk," Paull said.

Biased reactions

Dominic Proctor, global president of GroupM, WPP's media investment unit, came out casting doubt on the ability of the two groups to combine effectively. “They are making it clear that a primary motive for the merger is achieving scale in media buying," Proctor said in a media statement. "However, neither Omnicom nor Publicis was able to bring their investment teams together effectively as individual companies, so it will be fun to see if they can now do it together. Getting scale in media investment management is critical for clients, but it only works if it all joins up. We welcome a competitor in this space. Media investment management relies heavily on scale, but scale counts for nothing if it continues to be disparate.”

David Jones, Havas chief executive, minced even fewer words. "I'm not sure this is in the best interests of their clients or their talent," he said in a statement. "Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex."

WPP's leader, Martin Sorrell, was more diplomatic, telling Reuters on Sunday: "It's an extremely bold, brave and surprising move. You have to give every credit to Maurice [Levy, Publicis CEO], he managed to persuade him [Omnicom chief John Wren]." Sorrell also complimented the deal as being good for Publicis in financial terms. However, he added that the deal appeared to be "off-strategy" for Levy, who who has built Publicis with a focus on digital marketing and faster growth markets such as India and China.

Culture questions

In Woolley's opinion, the main reason for the merger is ego. "Maurice Levy is looking to have a legacy that he can leave behind when he retires in five years time, and it will be the largest comms group in the world," Woolley said. "John Wren, CEO of the biggest comms group. Between the two of them there is no love lost with the little English knight."

Woolley also expressed cynicism about the French and American giants meshing well together. "The French and the Americans...not since the independence have they had a close working relationship," he said, jokingly referring to American use of the term "Freedom fries" instead of "French fries". "If you’re a big French multinational company that’s been with Publicis Groupe for years, if you feel the entire company is more American than French, that will be a problem for you.

"Clients will have the same choices they’ve always had," Woolley said: "More agencies from the same holding company." In truth, the merger promises a lot of benefits only to the top-10 clients. "The rest won’t see financial benefits," he added.

It will be interesting to see what kind of culture arises out of the merger. WPP has a strategy of managing the whole group and having everything fit within the group, commented Woolley. Whereas within Publicis, each agency has its distinctive culture. On the media side, Vivaki's buying group only works as a buying group, whereas GroupM thinks of the agencies as a strategic opportunity in every pitch. Omnicom Media Group is about coordinating media buying, allowing PHD and OMD to compete against each other as separate entities.

One major impact may be on digital media buying. "When you have that much mass, you can acquire and own actual media itself," Woolley said. "Dentsu has been doing this in Japan since they started—an end-to-end media solution."

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